The market has been talking about the next Brazilian crop for some time. However, effectively, the new production cycle begins with the blossoming. We had some early reports about it in August, but last week’s blossoming signs really serve as a better starting point for the next production. This early blossoming was showy, which has encouraged growers for the next crop. The rains of the last few weeks were beneficial, and the indication of climate models for the last quarter of 2022, with normal moisture levels, reinforces the positive sentiment.
In this sense, the first sign for the 2023 production is positive and reinforces the expectations of the market, which was already considering a scenario of improvement in future supply. Proof of this is the negative slope of the coffee futures price curve on the New York Stock Exchange, with the coffee price for the most distant position lower than in the nearest positions. It is interesting to note how the market has calibrated the diverging short- and long-term signals. This adjustment is made through the narrowing and widening of the spread between Dec/22 (spot contract) and Sep/23 (new crop) positions. In bullish times for the market, the negative difference between the contracts is likely to become larger, decreasing in periods of slowdown. The reference is a negative difference of -20 cents.